EEOC v. MN Law Enforcement Association

Filing

OPINION FILED - THE COURT: LAVENSKI R. SMITH, MORRIS S. ARNOLD and BOBBY E. SHEPHERD. Lavenski R. Smith, Authoring Judge (PUBLISHED) [3816518] [10-2699]

United States Court of Appeals
FOR THE EIGHTH CIRCUIT

___________
No. 10-2699
___________
Equal Employment Opportunity
Commission,

*
*
*
Plaintiff - Appellee,
*
* Appeal from the United States
v.
* District Court for the
* District of Minnesota.
Minnesota Department of Corrections; *
American Federation of State,
*
County and Municipal Employees,
*
Unit 208; Minnesota Association of
*
Professional Employees; Middle
*
Management Association; American
*
Federation of State, County and
*
Municipal Employees, Council No. 5, *
AFL-CIO; Minnesota Nurses
*
Association,
*
*
Defendants,
*
*
Minnesota Law Enforcement
*
Association,
*
*
Defendant - Appellant.
*
___________
Submitted: March 16, 2011
Filed: August 10, 2011
___________
Before SMITH, ARNOLD, and SHEPHERD, Circuit Judges.
___________

Appellate Case: 10-2699

Page: 1

Date Filed: 08/10/2011 Entry ID: 3816518

SMITH, Circuit Judge.
Minnesota Law Enforcement Association (MLEA) appeals the district court's1
grant of summary judgment to the Equal Employment Opportunity Commission
(EEOC), concluding as a matter of law that MLEA's retirement plan arbitrarily
discriminates against older employees on the basis of age, in violation of the Age
Discrimination in Employment Act (ADEA). For the reasons that follow, we agree
with the district court's conclusion and affirm its grant of summary judgment to
EEOC.
I. Background
The Minnesota Department of Corrections (DOC) is a state agency that operates
ten correctional facilities within Minnesota. DOC employees who hold certain
positions within the agency participate in either the Correctional Employee Retirement
Plan or the State Patrol Retirement Fund. Minnesota law governs the plans and allows
agency-employers like DOC and their employees to contribute to the plans at higher
rates than other state retirement plans permit. Moreover, Minnesota law also
authorizes agencies like DOC to
establish optional annuity forms to pay a higher amount from the date of
retirement until an employee is first eligible to draw Social Security
benefits, reaches age 65, or reaches the age the employee is eligible to
receive unreduced Social Security benefits, at which time the monthly
benefits must be reduced.
Minn. Stat. § 352.93, subdiv. 3(a).
DOC included in its collective-bargaining agreements with the various labor
unions representing its employees an "Early Retirement Incentive Program" (ERIP)
1

The Honorable Paul A. Magnuson, United States District Judge for the District
of Minnesota.
-2-

Appellate Case: 10-2699

Page: 2

Date Filed: 08/10/2011 Entry ID: 3816518

provision. The parties refer to this provision as the "age 55 cliff." Specifically, the
ERIP provides that a plan participant who retires during the pay period of his or her
55th birthday, and is covered by the Correctional Employee Retirement Plan or the
State Patrol Retirement Fund, is eligible to receive an unreduced continuation of the
employer's contribution toward his or her health- and dental-insurance premiums until
he or she reaches age 65. This contribution thereby encourages early retirement for
this age group. Meanwhile, any employee between the ages of 50 and 55 who elects
to retire—and who has a certain length of tenure with the agency—receives an ERIP
benefit but less.2 Finally, any employee between the ages of 55 and 60—60 being the
age of mandatory retirement—who chooses to retire receives no continuation of
employer contributions. As the EEOC succinctly summarizes in its brief, "[t]he age
55 cliff meant that, in order to obtain this benefit, employees must retire at 55, or
forever lose the opportunity to obtain the benefit. . . . Employees hired after age 55
never could obtain the early retirement benefit."
Amid growing concern that a court might consider this ERIP unlawfully
discriminatory, various state agencies and their respective employee unions eliminated
the ERIP from their collective bargaining agreements. Only MLEA, the official labor
union representing all non-supervisory DOC personnel, refused to negotiate any
modification to the ERIP. Consequently, in September 2008, EEOC sued DOC and
MLEA for injunctive and monetary relief, alleging that their collective-bargaining
agreement's ERIP unlawfully discriminated against state employees on the basis of
age, in violation of the ADEA.

2

As the district court observed, "[t]he [collective-bargaining agreement]
between [DOC] and [MLEA] is slightly different, allowing employees between the
ages of 50 and 55 to retire and receive a continuation of benefits until age 65. MLEAcovered employees who retire before age 55 receive a reduced benefit; those who
retire at age 55 receive full benefits."
-3-

Appellate Case: 10-2699

Page: 3

Date Filed: 08/10/2011 Entry ID: 3816518

On April 8, 2010, the district court granted summary judgment in EEOC's favor
and against DOC and MLEA. In granting summary judgment, the district court first
determined that the ERIP was facially discriminatory, in that it denied employees
certain benefits solely on the basis of their age. Second, the district court, relying
almost entirely on our decision in Jankovitz v. Des Moines Independent Community
School District, 421 F.3d 649, 653 (8th Cir. 2005), rejected DOC's and MLEA's
argument that the facially discriminatory ERIP fell within the ADEA's ERIP "safe
harbor." Presently, only MLEA appeals this ruling.
II. Discussion
On appeal, MLEA maintains that its collective-bargaining agreement's ERIP
does not discriminate against employees on the basis of their age and thus comports
with the ADEA.
"We review the grant of summary judgment de novo, applying the same
standard as the district court." McClendon v. Union Pac. R.R. Co., 640 F.3d 800, 803
(8th Cir. 2011). As is its name implies, "[t]he ADEA prohibits employers from
discriminating against any individual on the basis of age with respect to his or her
'compensation, terms, conditions, or privileges of employment,' which specifically
encompass 'all employee benefits.'" Jankovitz, 421 F.3d at 653 (quoting 29 U.S.C.
§§ 623(a), 623(l) . Pertinent to our analysis is the "affirmative defense under 29
U.S.C. § 623(f)(2)(B)(ii), which was added to the ADEA by Congress's enactment in
1990 of the Older Workers Benefits Protection Act (OWBPA)[, Pub. L. No. 101-433,
§ 103(1), 104 Stat. 978, 978–79]." Id. at 651. Specifically,
Congress enacted the [OWBPA] in response to the Supreme Court's
decision in Pub. Employees Ret. Sys. v. Betts, 492 U.S. 158, 109 S.Ct.
2854, 106 L.Ed.2d 134 (1989) (holding that the ADEA applies only to
hiring, firing, wages, salaries, and "other non-fringe-benefit terms and
conditions of employment"), in order to clarify that the ADEA applies
to all employee benefits, including early retirement benefits.
-4-

Appellate Case: 10-2699

Page: 4

Date Filed: 08/10/2011 Entry ID: 3816518

Id. at 651 n.4. Under MLEA's ERIP, no employee over the age of 55 is eligible for the
early-retirement benefits that the ERIP offers. As this court recognized in Jankovitz,
where, as here, "it is undisputed that an employee is ineligible for early retirement
benefits under the . . . ERIP if he or she is over [a certain] age," the ERIP is
"discriminatory on its face." Id. at 653.
Still, Congress included in the OWBPA an ERIP "safe-harbor" provision that
insulates an employer from ADEA liability so long as the employer's ERIP satisfies
certain criteria. Accordingly, the dispositive question is whether MLEA's otherwise
invalid ERIP qualifies for protection under the ADEA's safe-harbor provision. That
safe-harbor provision states:
It shall not be unlawful for an employer, employment agency, or labor
organization—
***
(2) to take any action otherwise prohibited under subsection (a),
(b), (c), or (e) of this section—
***
(B) to observe the terms of a bonafide employee benefit
plan—
***
(ii) that is a voluntary early retirement incentive plan
consistent with the relevant purpose or purposes of
this chapter.
29 U.S.C. § 623(f)(2)(B)(ii). Thus, under the ADEA's ERIP safe harbor, a facially
discriminatory ERIP like MLEA's is only lawful if it is (1) voluntary and (2)
"consistent with the relevant purpose or purposes of [the ADEA]." 29 U.S.C. §
623(f)(2)(B)(ii). Notably, because the ADEA's ERIP safe harbor constitutes a
-5-

Appellate Case: 10-2699

Page: 5

Date Filed: 08/10/2011 Entry ID: 3816518

statutory affirmative defense, the defendant, MLEA, bears the burden of
demonstrating that its ERIP meets these requirements. Jankovitz, 421 F.3d at 654
(citing 29 U.S.C. § 623(f)(2)).
In Jankovitz, this court determined that an ERIP, identical to the instant MLEA
ERIP in all material respects, failed to satisfy the ADEA's ERIP safe harbor. In
Jankovitz, the ERIP
offered its employees early retirement benefits that included payment of
health insurance premiums until the age of 65 and a one-time cash
payment equal to approximately thirty percent of the employee's annual
salary. . . . [D]efendant [later] amended its early retirement benefits plan
so that eligible teachers could receive a lump sum payment based upon
the number of unused sick leave days accumulated as of the date of
retirement.
Id. at 650. Specifically, the Jankovitz court determined that plans of this nature which
effect "adverse changes in employment benefits based solely upon age are inconsistent
with the purposes of the ADEA." Id. at 655. In reaching this conclusion, the court first
recognized that, among the ADEA's stated purposes, the "relevant purpose" in the
ERIP context is the ADEA's aim of "prohibit[ing] arbitrary age discrimination in
employment." Id. at 654 (citing 29 U.S.C. § 621(b)). From this first premise, the court
reasoned that "[a]rbitrary age discrimination occurs when an employer denies or
reduces benefits based solely on an employee's age," concluding that "[t]hat is
precisely what defendant's amended ERIP does." Id. Likewise, that is precisely what
MLEA's ERIP does. An employee's eligibility for the attractive early-retirement
benefits vanishes when that employee reaches 55 years of age, considering no other
factors. Indeed, "[t]he basis for our conclusion" that the Jankvoitz ERIP was
"inconsistent with a purpose of the ADEA [was] the fact that the amount of available
early retirement benefits drops to zero upon an employee's attainment of the age of

-6-

Appellate Case: 10-2699

Page: 6

Date Filed: 08/10/2011 Entry ID: 3816518

65." Id. at 655. This exclusively age-based reduction in benefits typifies "arbitrary age
discrimination" and therefore fails to meet the ADEA safe harbor's requirements.
Nevertheless, MLEA counters that, because other portions of the ADEA
explicitly authorize state agencies to compel the retirement of firefighters and law
enforcement at age 55, see 29 U.S.C. § 623(j), MLEA's ERIP cannot logically be
viewed as inconsistent with the ADEA's relevant purposes. According to MLEA, "[i]t
is axiomatic that, where Congress has declared that law enforcement officers may be
required to retire at age 55, a program that incents them to do so is not inconsistent
with the purpose of the ADEA." MLEA's argument is superficially appealing.
However, we stated in Jankovitz that "[a]ge discrimination can be established with
respect to employee benefits regardless of whether the employer was required to
provide the benefits in question to its employees." 421 F.3d at 653. Thus, although
DOC is not obliged under federal law to employ certain persons over the age of 55 for
reasons that may include age, it may not discriminate against all persons over age 55
solely due to their age.
For an example of an ERIP that does qualify for ADEA safe-harbor protection,
MLEA need look no further than our decision in Morgan v. A.G. Edwards & Sons,
Inc., 486 F.3d 1034 (8th Cir. 2007). In Morgan, we affirmed the validity, under the
ADEA's safe-harbor provision, of an ERIP that allowed all employees who were age
50 or older and had at least 15 years of service to retire early in exchange for certain
severance benefits, which included one year's salary, a lump-sum bonus payment, one
year's health coverage and basic life insurance, and the right to vest in an unvested
portion of deferred compensation. Id. at 1037. Contrasting that ERIP to the invalid one
in Jankovitz, we explained that,

-7-

Appellate Case: 10-2699

Page: 7

Date Filed: 08/10/2011 Entry ID: 3816518

[c]ontrary to Morgan's argument, the [ERIP] differs substantially from
the faulty Jankovitz plan and is more akin to the valid Auerbach[3] plan.
The [ERIP] does not favor younger employees over older employees.
Rather, employees who were age 50 or older with fifteen or more years
of service were eligible for the [ERIP]. The [ERIP] offered the same
incentives to all eligible persons and did not employ an age-based
phase-out where plan benefits decreased over time or were reduced to
zero upon a certain age in order to encourage employees to participate
in the plan. Because the [ERIP] does not arbitrarily discriminate on the
basis of age, the plan is consistent with the purposes of the ADEA.
Id. at 1042.
In contrast to the permissible ERIP that we reviewed in Morgan, the instant
ERIP, by operation of its "age-55 cliff," does arbitrarily discriminate on the basis of
age. In turn, the arbitrary age discrimination that the age-55 cliff works renders the
ERIP inconsistent with the ADEA's relevant purpose, Jankovitz, 421 F.3d at 654, and
consistency with the ADEA's purposes is one of the twin prerequisites for protection
under the ADEA's ERIP safe harbor.4 29 U.S.C. § 623(f)(2)(B)(ii). Thus, because
3

Auerbach v. Bd. of Educ. of the Harborfields Cent. Sch. Dist. of Greenlawn,
136 F.3d 104, 113–14 (2d Cir. 1998).
4

The other prerequisite for protection under the ADEA's ERIP safe harbor is
that the ERIP be voluntary. 29 U.S.C. § 623(f)(2)(B)(ii). EEOC maintains that
MLEA's ERIP is involuntary because any persons who are already over the age of 55
when DOC hires them will be ineligible for the benefits through no volition of their
own. This court has not spoken at length on the voluntariness of a given ERIP, aside
from stating in Morgan that, "[t]o determine whether a retirement plan is voluntary,
a court must consider whether, under the circumstances, a reasonable person would
have concluded that there was no choice but to accept the offer." 486 F.3d at 1040
(quotation and citation omitted). In light of our conclusion that MLEA's ERIP fails to
meet the ADEA's safe-harbor provision because the ERIP is inconsistent with the
ADEA's relevant purpose of prohibiting arbitrary age discrimination in employment,
we need not address whether the ERIP is voluntary.
-8-

Appellate Case: 10-2699

Page: 8

Date Filed: 08/10/2011 Entry ID: 3816518

MLEA's facially discriminatory ERIP fails to satisfy the ADEA's ERIP safe harbor,
the district court correctly concluded that, as a matter of law, MLEA's ERIP violates
the ADEA.
III. Conclusion
As the district court recognized, our opinion in Jankovitz squarely forecloses
MLEA's argument, and, therefore, we affirm the district court's grant of summary
judgment.
______________________________

-9-

Appellate Case: 10-2699

Page: 9

Date Filed: 08/10/2011 Entry ID: 3816518